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3 Financial Steps You Can Take RIGHT NOW To Help Launch 2016

“You never have to recover from a great start.”

This is a great quote that can apply to your financial journey for 2016! While we’re still a couple of weeks away from the new year, you can take steps right now to launch into 2016 with a financial fury!

5 Financial Steps You Can Take RIGHT NOW

  1. Open a 529 College Savings Plan for each of your children (or grandchildren)  One of the greatest blessings a child can receive is a college education free from the burden of student loans! Plus there are usually tax incentives for investments into your state’s plan!
  2. Open an online Savings Account (and start saving for Christmas 2016!) I am a big fan of online savings banks, and have held my savings there for years.
  3. Increase contributions to the retirement account (401k, 403b, 457, TSP, SEP-IRA, IRA, Roth-IRA, TFSA, RSP)  Even a 1% increase can completely change the trajectory of your financial future!

These three steps could be completed in less than 30 minutes. Why not do it now?

Challenge: Learn New Things

I love to learn new things!  If I learn something new every single day, then my life is very good.

I really want to challenge you to learn something new every day too. Here are some things I have learned that may help you out:

  • Insurance rates are much cheaper when bundled (auto & home; home & life; etc.) and for most people who have priced theirs out within the past couple of years, the savings could be $200 or more per year.
  • When you go to a dentist or doctor, you can negotiate the charges.  It is a service!!!  Many times, you can obtain a substantial discount on the amount you owe after insurance has paid its portion.  I have saved 10% twice and 6% once, each saving me $100s of dollars!
  • Use cash envelopes for spending categories that you tend to impulse on – groceries, dining out, clothing, spending money, entertainment.  We budget a set amount, pull it out in cash, and refuse to approach the bank again for the rest of the month.  When the money runs out, we’re done for the month!  It ensures you will NEVER overspend your budget!
  • Buy off-brands at the grocery store.  We have saved over $200/month since going to a cash envelope for groceries and purchasing the off-brands.  Off-brand milk tastes just like name-brand milk.  Off-brand Cheerios taste just like Cheerios.  Off-brand Froot-Loops taste just like Froot Loops.  Off-brand fritos taste just like Fritos.  I’m sticking with my Heinz ketchup, however.
  • Wait overnight on any purchase greater than $200.  I have not regretted this at all.  I have waited overnight on every large purchase, and it has really cooled the jets on some deals I might have made in the past.  This is a great way to avoid buyer’s remorse!  Wait.
  • Garage sales, yard sales, rummage sales, jockey lot sales, e-bay – are all great ways to find a great deal.
  • Fund some FUN with your tax refund.  I always make sure that we fund our summer vacation with our tax refund.  This ensures that I am going to follow the budget!  If my budget did not allow me to have fun, then it is quite likely that I would not be teaching this stuff!  I would certainly be less passionate about it.
  • Ask.  If you are going to spend a large sum of money on something, ask around for it first.  Somebody might have the very thing you are going to purchase and will sell it for pennies on the dollar or even give it to you!
  • Swap labor.  Help you friend or neighbor on their project and then have them help you out with yours.  No money.  Friendships are built.  Can you say WIN-WIN?

Can someone teach me something new today?  Add a comment below!

3 Ways to Save Money – Part Three

During this series, I’m sharing PROVEN and PRACTICAL techniques that have helped people save money.

PART ONE – Automatic Draft From Paycheck

PART TWO – Create an Escrow Account For Known, Upcoming Expenses

PART THREE – Establish Accountability

Find someone who is (1) winning with money, (2) not trying to sell you something, and (3) available to help you. Ask them to hold you accountable to your saving goal.  I have seen some people go to the extreme length of actually giving the money to the other individual to hold for them because they cannot trust themselves to keep their own hands off of it.

Accountability can also be created by your written spending plan that you prepare every month before the month begins (you do prepare one, right?).  This plan helps cement your goals in your mind and helps you connect the fact that if you spend money on unplanned items, you will literally be robbing yourself of your savings goals.

I am married – this means I have built-in accountability.  Jenn is a huge saver.  She keeps me (the spender) in control. Establish accountability – it works!

3 Ways to Save Money – Part Two

During this series, I’m sharing PROVEN and PRACTICAL techniques that have helped people save money.

PART ONE – Automatic Draft From Paycheck

PART TWO – Create an Escrow Account For Known, Upcoming Expenses

For those unfamiliar with an escrow account, it is a savings account that is generally established by a mortgage company.  The mortgage company totals the annual cost of property taxes and homeowner’s insurance and divides it by the number of payments being made each year.  The mortgage company then pays for the taxes and insurance from this escrow (savings) account.  For example, if the property taxes are $1,200/year (sorry Northern folks – this is how low they are in the South) and the insurance is $600, then the total amount needed each year is $1,800.  The mortgage company will collect $150 extra with each monthly payment to place into the escrow account.

An escrow account smooths out the cost over a year – instead of having to pay for it all in one month.  It tightens the monthly budget, but having a fully funded escrow account sure is AWESOME when vacation arrives and the money has already been saved to pay cash for it!  Those who have a mortgage with an escrow account will testify to the fact that they never worry about paying for the taxes and insurance – ask someone!

Take it from one who has lived it – if you do not plan for your known, upcoming expenses, your ability to save money will be tremendously hampered!

Related Tool – Known, Upcoming Expenses Calculator

 

3 Ways to Save Money – Part One

One of the largest issues I see during one-on-one financial coaching is the inability to save money. Saved money is essential to long-term sustainability.  Saved money relieves stress and allows you to take a chance.  Saved money allows life to happen (job loss, disability, pay cut, injury, etc.).

But you already knew that part.  Yet, even though we KNOW how important it is to save money, most people fail to do so.  So, I wanted this series to focus PROVEN and PRACTICAL techniques that have helped people save money.

If you have negative savings (no money plus overdrafted accounts and debt), the goal is to bring you to zero.  If you are at zero, the goal is to get to at least $2,500.  If you have been able to save a substantial amount of money, it is my hope that you will participate in the discussion and share your own tips that have worked well for you!

PART ONE  Automatic Draft From Paycheck

Establish a savings account and have the money drafted from every single paycheck.  Whether it’s $25 or $250 per pay period – just SAVE!  You KNOW that the car is going to break down.  You KNOW that the school is going to send home a surprise expense.

By establishing this draft, it allows the money to be “out-of-sight.”  When money is out-of-sight, it can be out-of-mind.  This allows the account to grow without being robbed.

Now, I personally had a problem with this when I did not have a monthly budget.  I would ROB my own savings account about 2.1 microseconds after I was paid.  My account did not start growing in a healthy manner until after Jenn and I developed a plan that we agreed on.

How about you?  Is your paycheck set up for an automatic draft into your savings account?

5 Reasons to Open a Savings Accounts with Online Banks

If you have ever heard me speak or teach about saving money, then you have undoubtedly been introduced to online banks. I’m not talking about banks that have websites but about banks that have little to zero physical “bricks & mortar” locations.

Here are 5 reasons why I use online banks (over a local bank) for my savings accounts:

  1. High Interest – These banks pay interest equivalent to a 30-month CD, but none of the CD restrictions exist (early withdrawal penalty, terms, etc). Currently, these accounts are paying interest between 0.75% – 0.99%. That’s WAY BETTER than the .01% that most local banks are paying on simple savings accounts!
  2. No Minimum Balance – While most of these banks require a small minimum amount to open an account, they do not have a minimum balance requirement going forward. This makes it perfect for any and every saver.
  3. Sub-Accounts – These banks allow you to create “named accounts” within the main account so you can better track your savings for various items. For instance, I have sub-accounts named: “Business Operating Reserves”, “Christmas”, “Vacation”, “Property Taxes”, “Life Insurance”, and “Emergency Fund”. When I log in to my account, I can instantly see how much I have saved for each of these items.
  4. Customer Service – I’ve experience nothing but the best service from my online banks. If you think about it, they have to have really amazing customer service. After all, they don’t have local branches. The only way they can attract and retain customers is by serving each customer extremely well.
  5. No Fees – I’ve never been charged a fee by my online bank. No once.
  6. BONUS – Automatic savings – you can create automatic transactions that draft money from your regular bill paying bank account on a frequency that works best for you. I have established automatic monthly drafts so I don’t have to “feel like it” to ensure I save money each month! These banks are also FDIC insured so your deposits are protected.

I encourage you to click HERE for the banks that I recommend. Choose the one that suits you best and get your savings automated!

Already use a Savings Account with an Online Bank? Tell us what you like most about them?

#1 Debt Mistake

When I meet people at events, I often ask them: “What is your top financial goal for the year?”

By far, the most common response is, “I want to reduce or eliminate debt!”

This is an incredible goal. Reducing or eliminating debt helps create financial margin and reduce stress. However, many people make the mistake of skipping straight to debt reduction without first saving money in an emergency fund. This is a HUGE MISTAKE.

You see, I made this mistake for a long time. I wanted to kill debt. I was frustrated and angry and wanted to say goodbye to my long-time friend, Sallie Mae Student Loans, the bank, credit card companies, and stores. I wanted the debt to be G-O-N-E. So I ran right past the more important step – saving money.

Take a minute to think about it. If you do not save but only focus on attacking your debt with any and all extra money (tax refunds, bonuses, money freed up by budgeting better, etc), you will begin to see your debt go down.

Then your car will break down.

How will you pay for it? Since you skipped the “save money” step, you will have to use credit to pay for it. This becomes an extremely disappointing moment. It causes many people to give up on debt freedom and say, “I just can’t seem to get ahead.”

Choose to save money first. I recommend starting with at least one month of expenses. Once all of the non-house, non-business debt is gone, build the savings to 3 months of expenses.

Yes, this slows down the debt pay-off. Yes, it’s frustrating to focus on savings when you have debt (especially when you include interest). BUT if you save first, you will secure your ability to stop acquiring new debt, which is the biggest step you can make towards true financial freedom.

Interested in learning more about saving, eliminating debt, and budgeting? Check out my book I Was Broke. Now I’m Not.

Savings Accounts With Online Banks – Why You Should Consider Using One

To be very clear, I am talking about banks that exist almost exclusively “online” – not banks that have a website.

Some great examples of these banks include:

  1. Capital One 360 Savings Account
  2. Discover Bank Savings Account
  3. Ally Bank Savings Account

I have used these type of banks for many years, and I love them!

5 Reasons I Love My Savings Accounts with Online Banks

  1. High Interest  These banks pay interest equivalent to a 30-month CD, but none of the CD restrictions exist (early withdrawal penalty, terms, etc.) As of this writing, these accounts are paying interest between 0.75% and 0.90%. That’s WAY BETTER than the 0.01% that most local banks are paying on simple savings accounts!
  2. No Minimum Balance  While most of these banks require a small minimum amount to open an account, they do not have a minimum balance requirement going forward.
  3. Sub-Accounts  These banks allow you to create “named accounts” within the main account so you can better track your savings for various items. For instance, I have sub-accounts named: “Business Operating Reserves”, “Christmas”, “Vacation”, “Property Taxes”, “Life Insurance”, and “Emergency Fund”  When I log in to my account, I can instantly see how much I have saved for each of these items.
  4. Customer Service  I’ve experienced nothing but the best service from my online banks. They have to, really. After all, they don’t have local branches so the only way they can attract and retain customers is by serving each customer extremely well.
  5. No Fees  I’ve never been charged a fee by my online bank. Not once.
  6. BONUS  Automatic savings – you can create automatic transactions that draft money from your regular bill paying bank account on a frequency that works best for you. I have established automatic monthly drafts so I don’t have to “feel like it” to ensure I save money each month!

I encourage you to click on the links for each of the banks, choose the one that suits you best, and get your savings automated!

Disclosure

Save Money BEFORE Attacking Debt

When we launched our “How To Have The Best Financial Year Of Your Life In 2014” live on-line event this year, I asked the question: “What is your top financial goal for 2014?”

The top response BY FAR was “I want to reduce/eliminate debt.”

It is a noble goal that will help create financial margin and reduce stress. However, many people make the mistake of skipping straight to debt reduction without first saving some money in an emergency fund.

This is a big mistake.

You see, we want to kill debt. We’re frustrated and angry and want to say goodbye to our long-time friend, Sallie Mae Student Loans, the banks, credit card companies, and stores. We want the debt to be G-O-N-E!

And we run right past a more important step – saving money.

Think about it. If you do not save money and begin to attack your debt with any and all extra money such as tax refunds, bonuses, and money freed up by better budgeting, you will begin to see your debt go down.

Then your car will break down.

How will you pay for it? Since you skipped the “saving money” step, you will have to use credit to pay for it.

This is demoralizing, and it causes many people to give up on their debt freedom march saying, “I just can’t seem to get ahead.”

Choose to save money first. I recommend $2,500 as a good start. Once all of the non-house, non-business debt is gone, build the savings to 3 months of expenses.

I’ll finish by sharing this: I’ve yet to meet anyone who told me, “We’ve just saved too much money. I regret it.”

Never. Met. That. Person.

How Much Interest Is Your Savings Account Paying?

As I describe in my book Oxen, you begin truly winning with money when your “money makes money for you.”

With that said, here’s a great question to ask yourself: “How much interest is my bank paying me for the money in my savings account?”

Chances are high that the number is 0.01%. In fact, I checked several big banks as I wrote this post and here’s what I found for their basic savings accounts:

  • Bank of America – 0.01%
  • Wells Fargo – 0.01%
  • Bank of the West – 0.03%

This is why I hold all of my business and personal savings in ON-LINE BANKS. This is not a “bank with website access.” They are banks that exist almost exclusively on-line. Since they do not have physical buildings, they have to do extraordinary things to attract customers. I’ve discovered they do two key things very well:

  1. No fees They’ve virtually eliminated fees – low balance fees, etc.
  2. Way better INTEREST! They are currently paying around 0.75% on savings (about the same as a 30-month CD, but I don’t lose the liquidity of my money!)

Since 2007, I have held all of my savings and operating reserves with Capital One 360.

I encourage you to do 2 things with this information:

  1. Find out how much interest your bank is currently paying on your savings.
  2. Check out the on-line banks we recommend HERE.

Disclosure

Information accurate as of 2/4/2014.

Save, Invest, or Pay Off Debt?

Suppose you happened upon a substantial amount of money all at one time. For discussion purposes, let’s say it was $10,000.

What would you do with this money? There are really five options available to you:

  1. Spend it
  2. Give it away
  3. Put it into savings
  4. Pay off debt
  5. Invest it

Most people will be faced with this type of situation at least once in their life. Here are some thoughts to consider with each option.

1. Spend it

This would certainly be a fun option! The money could be used to make much-needed home repairs, purchase a vehicle, or take a vacation.

2. Give it away

Being able to give $10,000 away is an incredible option! Consider the impact you could make on the world around you by giving money to support causes you really believe in.

3. Put it into savings

Financial margin provides something I call “financial confidence.” When I first achieved financial margin, it was as if scales literally fell from my eyes. I was able to “see” opportunities like never before.

4. Pay off debt

Debt increases a person’s operating costs and requires more income. If the debt is associated with a no-value or declining value item, it is literally the equivalent of “robbing yourself.”

5. Invest it

What if you could use the $10,000 to start a business that will produce $4,000 of income each year for the next 40 years? Consider the investments you might be able to make – it could literally change your life!

Your thoughts are appreciated. What would YOU do?

Saving For Known Upcoming Non-Monthly Expenses

Everyone must save for three things: (1) Emergencies, (2) Known Upcoming Non-Monthly Expenses, and (3) Dreams

Of these three, it seems like saving for #2 – Known Upcoming Non-Monthly Expenses is the most difficult and creates the most issues with budgeting.

Here’s why Known Upcoming Non-Monthly Expenses create severe budgeting difficulty:

  1. They are non-monthly  Because of this, we tend to forget about them until they show up
  2. They are usually larger expenses  Property taxes, insurance premiums, Christmas, vacation, car maintenance and repairs, and insurance deductibles usually have larger price tags than typical monthly expenses
  3. We don’t save for the expenses monthly  We wait until the bill arrives and then we are forced to scramble in an attempt to pay for it

This is why I call these type of expenses “Budget Crushing Expenses.” You can avoid this stress entirely by creating a Known Upcoming Expenses saving plan!

Here’s a step-by-step way for you to eliminate “Budget Crushing Expenses” from your life:

  1. Download our free “Known Upcoming Expenses Calculator” tool HERE.
  2. Enter all your “Known Upcoming Expenses” into the tool – include the annual expense of each line item.
  3. Enter your “# of Pay Periods Per Year” into the tool – enter “12” if paid monthly, “26” if paid every 2 weeks, “52” if paid weekly, and “24” if paid twice each month.
  4. You have now calculated the amount you need to save out of each paycheck to ensure all of your Known Upcoming Non-Monthly Expenses are covered.
  5. BONUS STEP: Set up an on-line savings account (I use Capital One 360 – formerly known as ING Direct) and make your savings automatic. In other words, you can set up automated transfers to your on-line savings account. This allows you to “set it and forget it” and KNOW you’re major known upcoming non-monthly expenses are covered!

AUTHOR’S NOTE: I am paid monthly. I have set up a monthly transfer to happen on the 6th day of the month from my regular bill-paying bank account to my Capital One 360 account. It may not be the most exciting thing in life, but it is INCREDIBLE to know I have eliminated “budget crushing expenses” from my life!

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10 Summer Fun Ideas That Won’t Break The Bank

Summer is an incredible time to gear down, rest, and renew relationships.

It is also a time that could break the bank if one is not very careful. To help you have an incredible summer without destroying the budget, we put together a list of fun ideas for you:

10 Summer Fun Ideas That Won’t Break The Bank

  1. Go camping in a tent  Or as one of my friends calls it: “Pretend to be homeless” :) I love tent camping!
  2. Take a vacation with family or friends and SHARE the cabin/house/condo/etc.  My bride and I have done this many times. It cuts lodging costs by half (or more) and allows us to hang out with our friends/family even more!
  3. Take up a hobby that doesn’t cost a lot. My friends play basketball once a week. I run with my daughter. Tennis costs next to nothing. Corn hole. Put on an art contest and invite your children and their friends to participate. Hike trails at a state park. Go swimming at a local park.
  4. Start a small business with your children. Ask them for their ideas. Choose one while teaching them the concept of value (what customers are willing to pay money for) and marketing/sales (no one will buy if they don’t know it exists). Sell the product/service on-line using a basic website (can set up through a basic free blogging service) and PayPal.
  5. Attend a play at a local community theater. If you volunteer to serve at several of their events, you can probably attend a show for FREE!
  6. Volunteer at a local food pantry or homeless shelter. This really costs nothing, and it allows you to serve those who are struggling!
  7. Go to yard sales, buy cool stuff, and sell on-line.  My children love discovering “treasures” on Fridays and Saturdays.
  8. Go fishing at a local pond or lake.  When I see my little son experience the thrill of catching a fish, touching it, and then tossing it back in the water – it is AWESOME! My daughter loves fishing too. And my bride catches some sun.
  9. Produce a home movie using a script written by your children. iPhones have HD video capability. Many iPads and nearly every MAC has iMovie which allows you to edit and produce the show. This really fosters creativity!
  10. Launch five helium balloons with your name and address and a note.  Ask the discoverer of the grounded balloon to write you back and tell you about where and how they found the balloon! You never know when you will hear back and from how far!

Any ideas you would add to the list?

TV Fast – No Netflix – No Directv

This summer, my bride and I have decided to be crazy and shut off our TV.

Beginning Saturday, we paused Directv for two straight months. Beginning today, Netflix will be paused for two straight months.

While this will certainly help out the budget, we made this decision because of a much more important commodity: “time”

More specifically: “focused, uninterrupted, and undistracted time with the family”

I’ll spend my 15 minutes every day to check my 78 web sites using the Internet, of course.

Besides, baseball is boring and always equals a nap.

Have you ever done something like this? How did it go?

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On-Line Banks – Why I Use Them For My Savings Accounts

If you have ever heard me speak or teach about saving money, then you have undoubtedly been introduced to on-line banks. I’m not talking about banks that have websites but about banks that have little to zero physical “bricks & mortar” locations.

I’m talking about banks like Capital One 360 (formerly ING Direct) and Ally Bank (built on the base of GMAC).

Here’s why I use on-line banks (over a local bank) for my savings accounts:

  1. Better interest rate On-line banks pay interest that is generally 5 to 8 times more than a local bank savings account (somewhere near that of a 2 to 3 year CD) – but it doesn’t affect the liquidity of my money
  2. Sub-Accounts If you have a regular savings account, all you can see is a total amount of the money the account currently contains. With on-line banks, you can create something called “buckets” or “sub-accounts” to give every dollar a designated name! This means you can create sub-accounts like “Christmas”, “Emergency Savings”, “Vacation”, “Life Insurance”, etc. See the example screen shot below from my Capital One 360 account. You can click the image to see a larger version. This makes it so much better!
  3. Automatic SavingsYou can establish automatic transfers from another existing bank account. In the example I show below, I have set up automatic transfers for my emergency fund, YMCA annual membership, House taxes and insurance, Christmas, and life insurance premiums. It is a “set it and forget it” approach to savings that is awesome!
  4. Customer Service  Because these banks only have an on-line presence, they have to be INCREDIBLE at customer service, or people would not even know about them. Every interaction I have had with my on-line banks has been an incredibly positive experience.
  5. FDIC-insured  These banks are insured by the FDIC – just like any other bank. That means your deposits are protected. I like that!
  6. No fees  There are no fees unless you exceed the monthly allowable transactions (or something extraordinary like that)
  7. No MINIMUM balance  This makes it perfect for any and every saver.

I encourage you to check them out: Capital One 360  and Ally Bank.

Set a savings goal. Then establish an automatic savings plan to help you accomplish it!

Do you use any of these banks? What do you like about them most?

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